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We are of the opinion, however, that respondent's approach
must be modified in one respect. That approach is based on the
notion that assets which produce income in two groupings must be
prorated between the two groupings. If an asset produces income
in only one grouping, it may only be apportioned to that
grouping. Thus, the U.S. dollar loan asset, which could not have
produced any exchange gain, can only be apportioned to subpart F
income, as respondent concedes on brief. In addition, some of
the foreign currency loans were not repaid to any extent in 1986,
could thus yield no exchange gain, and may therefore only be
counted toward subpart F income since they only produced interest
income. Other loans were repaid only in part, and only the
amount of repayment yielded exchange gain. These loan assets
should only be apportioned between the two groupings to the
extent of their repayment. The portion of the loan not repaid
should only be apportioned to the subpart F grouping. We agree
with petitioner that the proper formula to accomplish this is to
prorate the average outstanding principal balance of the foreign
currency denominated loans repaid during 1986 between the
statutory and residual groupings, and to apportion the average
outstanding principal balance of the foreign currency denominated
loans not repaid during 1986, as well as the average outstanding
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